##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended September 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period From  To
 Commission File Number 333-150888
 T3 MOTION, INC.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    20-4987549(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)2990 Airway Avenue, Suite A
    
    92626Costa Mesa, California
    
    (Zip Code)(Address of principal executive offices)
 (714) 619-3600
(Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



T3 MOTION, INC.  INDEX TO FORM 10-Q  September 30, 2010
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Condensed Consolidated Balance Sheets as of September 30, 2010 (unaudited) and December
31, 2009
    
    
    3Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and
Nine Months Ended September 30, 2010 and 2009 (unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30,
2010 and 2009 (unaudited)
    
    
    5Notes to the Condensed Consolidated Financial Statements (unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4T. Controls and Procedures
    
    
    29PART II. OTHER INFORMATION
    
    
    32Item 1. Legal Proceedings
    
    
    32Item 1A. Risk Factors
    
    
    32Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 3. Defaults upon Senior Securities
    
    
    32Item 5. Other Information
    
    
    32Item 6. Exhibits
    
    
    33Signatures
    
    
    33EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 T3 MOTION, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2010
    
    
    2009(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    40,966
    
    
    $
    2,580,798Restricted cash
    
    
    10,000
    
    
    
    Accounts receivable, net of allowance of $37,000 and $37,000, respectively
    
    
    486,806
    
    
    
    747,661Related party receivables
    
    
    46,392
    
    
    
    35,658Inventories
    
    
    1,342,170
    
    
    
    1,169,216Prepaid expenses and other current assets
    
    
    310,323
    
    
    
    161,997Total current assets
    
    
    2,236,657
    
    
    
    4,695,330Property and equipment, net
    
    
    638,464
    
    
    
    868,343Deposits
    
    
    934,374
    
    
    
    495,648Total assets
    
    $
    3,809,495
    
    
    $
    6,059,321LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    1,187,909
    
    
    $
    872,783Accrued expenses
    
    
    1,172,135
    
    
    
    1,064,707Related party payables
    
    
    610,000
    
    
    
    104,931Note payable
    
    
    393,468
    
    
    
    Derivative liabilities
    
    
    9,846,897
    
    
    
    11,824,476Related party notes payable, net of debt discount
    
    
    3,350,715
    
    
    
    1,836,837Total liabilities
    
    
    16,561,124
    
    
    
    15,703,734Stockholders deficit:Preferred stock, $0.001 par value; 100,000,000 shares authorized; 11,502,563
and 12,347,563 shares issued and outstanding, respectively
    
    
    11,503
    
    
    
    12,348Common stock, $0.001 par value; 150,000,000 shares authorized; 48,558,462
and 44,663,462 shares issued and outstanding, respectively
    
    
    48,559
    
    
    
    44,664Additional paid-in capital
    
    
    27,598,677
    
    
    
    23,356,724Accumulated deficit
    
    
    (40,414,711
    )
    
    
    (33,062,174
    )Accumulated other comprehensive income
    
    
    4,343
    
    
    
    4,025Total stockholders deficit
    
    
    (12,751,629
    )
    
    
    (9,644,413
    )Total liabilities and stock holders deficit
    
    $
    3,809,495
    
    
    $
    6,059,321
 See accompanying notes to condensed consolidated financial statements
 3




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T3 MOTION, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
 COMPREHENSIVE LOSS (UNAUDITED)
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net revenues
    
    $
    1,047,573
    
    
    $
    1,165,859
    
    
    $
    3,625,531
    
    
    $
    3,408,826Cost of net revenues
    
    
    915,922
    
    
    
    1,224,988
    
    
    
    3,265,195
    
    
    
    3,947,002Gross profit (loss)
    
    
    131,651
    
    
    
    (59,129
    )
    
    
    360,336
    
    
    
    (538,176
    )Operating expenses:Sales and marketing
    
    
    435,562
    
    
    
    486,127
    
    
    
    1,305,819
    
    
    
    1,483,281Research and development
    
    
    316,759
    
    
    
    364,258
    
    
    
    1,069,226
    
    
    
    963,119General and administrative
    
    
    813,786
    
    
    
    1,119,985
    
    
    
    2,730,770
    
    
    
    3,460,171Total operating expenses
    
    
    1,566,107
    
    
    
    1,970,370
    
    
    
    5,105,815
    
    
    
    5,906,571Loss from operations
    
    
    (1,434,456
    )
    
    
    (2,029,499
    )
    
    
    (4,745,479
    )
    
    
    (6,444,747
    )Other income (expense):Interest income
    
    
    54
    
    
    
    5
    
    
    
    1,281
    
    
    
    2,490Other income, net
    
    
    1,238,138
    
    
    
    633,985
    
    
    
    3,113,919
    
    
    
    4,862,922Interest expense
    
    
    (1,066,047
    )
    
    
    (874,316
    )
    
    
    (2,759,158
    )
    
    
    (2,060,986
    )Total other income (expense), net
    
    
    172,145
    
    
    
    (240,326
    )
    
    
    356,042
    
    
    
    2,804,426Loss before provision for income tax
    
    
    (1,262,311
    )
    
    
    (2,269,825
    )
    
    
    (4,389,437
    )
    
    
    (3,640,321
    )Provision for income tax
    
    
    
    
    
    
    
    
    
    
    800
    
    
    
    800Net loss
    
    
    (1,262,311
    )
    
    
    (2,269,825
    )
    
    
    (4,390,237
    )
    
    
    (3,641,121
    )Deemed dividend to preferred stockholders
    
    
    (689,109
    )
    
    
    
    
    
    
    (2,962,300
    )
    
    
    Net loss attributable to common stockholders
    
    $
    (1,951,420
    )
    
    $
    (2,269,825
    )
    
    $
    (7,352,537
    )
    
    $
    (3,641,121
    )Other comprehensive income (loss):Foreign currency translation income (loss)
    
    
    (206
    )
    
    
    (2,857
    )
    
    
    318
    
    
    
    (3,175
    )Comprehensive loss
    
    $
    (1,951,626
    )
    
    $
    (2,272,682
    )
    
    $
    (7,352,219
    )
    
    $
    (3,644,296
    )Net loss attributable to common stockholders per share:Basic
    
    $
    (0.04
    )
    
    $
    (0.05
    )
    
    $
    (0.16
    )
    
    $
    (0.08
    )Diluted
    
    $
    (0.04
    )
    
    $
    (0.05
    )
    
    $
    (0.16
    )
    
    $
    (0.08
    )Weighted average number of common shares outstanding:Basic
    
    
    48,553,897
    
    
    
    44,563,460
    
    
    
    47,393,938
    
    
    
    44,384,988Diluted
    
    
    48,553,897
    
    
    
    44,563,460
    
    
    
    47,393,938
    
    
    
    44,384,988
 See accompanying notes to condensed consolidated financial statements
 4




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T3 MOTION, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 Nine Months Ended September 30,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (4,390,237
    )
    
    $
    (3,641,121
    )Adjustments to reconcile net loss to net cash used in operating activities:Bad debt expense
    
    
    
    
    
    
    10,000Depreciation and amortization
    
    
    273,524
    
    
    
    273,603Gain on sale of fixed asset
    
    
    (7,500
    )
    
    
    Warranty expense
    
    
    77,144
    
    
    
    123,902Stock compensation expense
    
    
    647,098
    
    
    
    1,260,866Change in fair value of derivative liabilities
    
    
    (3,095,754
    )
    
    
    (4,862,598
    )Investor relations expense
    
    
    10,000
    
    
    
    80,000Amortization of debt discounts
    
    
    2,352,658
    
    
    
    1,662,091Change in operating assets and liabilities:Accounts and other receivables, net
    
    
    268,355
    
    
    
    498,623Inventories
    
    
    (172,954
    )
    
    
    813,243Prepaid expenses and other current assets
    
    
    (148,326
    )
    
    
    31,789Deposits
    
    
    31,873
    
    
    
    (3,886
    )Restricted cash
    
    
    (10,000
    )
    
    
    Accounts payable and accrued expenses
    
    
    368,278
    
    
    
    154,415Related party payables
    
    
    (104,931
    )
    
    
    Net cash used in operating activities
    
    
    (3,900,772
    )
    
    
    (3,599,073
    )CASH FLOWS FROM INVESTING ACTIVITIES:Loans/advances to related parties
    
    
    (28,795
    )
    
    
    Purchases of property and equipment
    
    
    (43,645
    )
    
    
    (10,084
    )Repayment of loans/advances to related parties
    
    
    18,062
    
    
    
    4,346Net cash used in investing activities
    
    
    (54,378
    )
    
    
    (5,738
    )CASH FLOWS FROM FINANCING ACTIVITIES:Loans / advances from related parties
    
    
    610,000
    
    
    
    Payments on note payable
    
    
    (100,000
    )
    
    
    Recission of common stock
    
    
    (250,000
    )
    
    
    Proceeds from the sale of preferred stock, net of issuance costs
    
    
    1,155,000
    
    
    
    1,250,000Proceeds from related party note receivable
    
    
    
    
    
    
    939,962Net cash provided by financing activities
    
    
    1,415,000
    
    
    
    2,189,962Effect of exchange rate on cash
    
    
    318
    
    
    
    (3,175
    )NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (2,539,832
    )
    
    
    (1,418,024
    )CASH AND CASH EQUIVALENTS  beginning of period
    
    
    2,580,798
    
    
    
    1,682,741CASH AND CASH EQUIVALENTS  end of period
    
    $
    40,966
    
    
    $
    264,717
 See accompanying notes to condensed consolidated financial statements
 5




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##### Table of Contents



T3 MOTION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)  Continued
 Nine Months Ended September 30,2010
    
    
    2009SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the period for:Interest
    
    $
    41,335
    
    
    $
    14,096Income taxes
    
    $
    800
    
    
    $
    800Supplemental disclosure of non cash activities:Issuance of common stock for related party payables
    
    $
    
    
    
    $
    1,536,206Conversion of related party payable to related party note payable
    
    $
    
    
    
    $
    498,528Conversion of accounts payable to note payable
    
    $
    
    
    
    $
    199,829Cumulative effect to retained earnings due to adoption of accounting standard
    
    $
    
    
    
    $
    1,981,338Cumulative effect to additional paid-in capital due to adoption of accounting standard
    
    $
    
    
    
    $
    4,013,085Cumulative effect to debt discount due to adoption of accounting standard
    
    $
    
    
    
    $
    859,955Conversion option of preferred stock and warrants issued with preferred stock recorded as derivative liabilities
    
    $
    1,401,360
    
    
    $
    Reclassification of derivative liability to equity due to conversion of preferred stock to common stock
    
    $
    1,121,965
    
    
    $
    Debt discount and warrant liability recorded upon issuance of warrants
    
    $
    838,779
    
    
    $
    851,277Amortization of preferred stock discount related to conversion feature and warrants
    
    $
    2,962,300
    
    
    $
    Conversion of preferred stock to common stock
    
    $
    4,000
    
    
    $
    Deposits for equipment
    
    $
    470,599
    
    
    $
    Receivable for sale of equipment
    
    $
    7,500
    
    
    $
    
 See accompanying notes to condensed consolidated financial statements
 6




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##### Table of Contents



T3 MOTION, INC.
 
 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 1  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Interim Unaudited Condensed Consolidated Financial Statements
   Going Concern
   7




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Reclassifications
  Use of Estimates
  Cash and Cash Equivalents
  Restricted Cash
  Concentrations of Credit Risk
   Fair Value of Financial Instruments
  8




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Revenue Recognition
      Share- Based Compensation
     9




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##### Table of Contents



Beneficial Conversion Features and Debt Discounts
  Business Segments
  For the Three Months Ended September 30,
    
    For the Nine Months Ended September 30,2010
    
    2009
    
    2010
    
    2009(unaudited)
    
    (unaudited)Net revenues:T3 Domestic
    
    $
    677,918
    
    
    $
    1,122,407
    
    
    $
    3,078,658
    
    
    $
    2,715,653T3 International
    
    
    369,655
    
    
    
    43,452
    
    
    
    546,873
    
    
    
    693,173Total net revenues
    
    $
    1,047,573
    
    
    $
    1,165,859
    
    
    $
    3,625,531
    
    
    $
    3,408,826
 NOTE 2  INVENTORIES
  September 30,
    
    
    December 31,2010
    
    
    2009(unaudited)Raw materials
    
    $
    1,179,414
    
    
    $
    959,909Work-in-process
    
    
    103,418
    
    
    
    91,013Finished goods
    
    
    59,338
    
    
    
    118,294$
    1,342,170
    
    
    $
    1,169,216
 NOTE 3  PREPAID EXPENSES AND OTHER CURRENT ASSETS
  September 30,
    
    
    December 31,2010
    
    
    2009(unaudited)Prepaid inventory
    
    $
    
    
    
    $
    64,744Vendor deposits
    
    
    194,883
    
    
    
    47,946Prepaid expenses and other current assets
    
    
    115,440
    
    
    
    49,307$
    310,323
    
    
    $
    161,997
 10




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##### Table of Contents



NOTE 4  RELATED PARTY NOTES PAYABLE
  September 30,
    
    
    December 31,2010
    
    
    2009(unaudited)Note payable to Immersive Media
Corp., 15% interest rate, net of
discount of $202,216 and $41,265,
respectively
    
    $
    797,784
    
    
    $
    958,735Note payable to Vision Opportunity
Master Fund, Ltd., 10% interest rate,
net of discount of $947,068 and
$2,621,898, respectively
    
    
    2,552,931
    
    
    
    878,102$
    3,350,715
    
    
    $
    1,836,837
 Immersive Note
       11




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Vision Opportunity Master Fund, Ltd. Bridge Financing
  th
    12




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##### Table of Contents



Lock-Up Agreement
  NOTE 5  DERIVATIVE LIABILITIES
      13




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September 30,2010(unaudited)Annual dividend yield
    
    
    Expected life (years)
    
    
    0.25-5Risk-free interest rate
    
    
    0.27%-2.55
    %Expected volatility
    
    
    79%-123
    %
        Level 3
    
    
    Level 3Carrying Value
    
    
    Carrying ValueSeptember 30,
    
    
    December 31,2010
    
    
    2009(unaudited)Embedded conversion options
    
    $
    5,963,936
    
    
    $
    8,853,893Warrants
    
    
    3,882,961
    
    
    
    2,970,583$
    9,846,897
    
    
    $
    11,824,476Decrease in fair value
    
    $
    3,095,754
 14




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Balance at January 1, 2010
    
    $
    11,824,476Issuance of warrants and conversion option
    
    
    2,240,140Reclassification to equity due to conversion of preferred stock
    
    
    (1,121,965
    )Change in fair value
    
    
    (3,095,754
    )Balance at September 30, 2010
    
    $
    9,846,897
 NOTE 6  EQUITY
 Series A Convertible Preferred Stock
       15




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Common Stock
   NOTE 7  LOSS PER SHARE
   Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net loss
    
    $
    (1,262,311
    )
    
    $
    (2,269,825
    )
    
    $
    (4,390,237
    )
    
    $
    (3,641,121
    )Deemed preferred stock dividend
    
    
    (689,109
    )
    
    
    
    
    
    
    (2,962,300
    )
    
    
    Net loss applicable to common stockholders
    
    $
    (1,951,420
    )
    
    $
    (2,269,825
    )
    
    $
    (7,352,537
    )
    
    $
    (3,641,121
    )Weighted average number of common shares
outstanding:Basic
    
    
    48,553,897
    
    
    
    44,563,460
    
    
    
    47,393,938
    
    
    
    44,384,988Diluted
    
    
    48,553,897
    
    
    
    44,563,460
    
    
    
    47,393,938
    
    
    
    44,384,988Net loss per share:Basic
    
    $
    (0.04
    )
    
    $
    (0.05
    )
    
    $
    (0.16
    )
    
    $
    (0.08
    )Diluted
    
    $
    (0.04
    )
    
    $
    (0.05
    )
    
    $
    (0.16
    )
    
    $
    (0.08
    )
 NOTE 8  STOCK OPTIONS AND WARRANTS
 Equity Incentive Plan
 16




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Stock Option/Stock Issuance Plan
   Common Stock Options
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Stock compensation expense  cost of net revenues
    
    $
    6,796
    
    
    $
    29,329
    
    
    $
    43,968
    
    
    $
    95,400Stock compensation expense  sales and marketing
    
    
    47,721
    
    
    
    84,777
    
    
    
    127,229
    
    
    
    263,215Stock compensation expense  research and development
    
    
    38,078
    
    
    
    49,652
    
    
    
    99,336
    
    
    
    153,897Stock compensation expense  general and administrative
    
    
    138,231
    
    
    
    260,803
    
    
    
    376,565
    
    
    
    748,354Total stock compensation expense
    
    $
    230,826
    
    
    $
    424,561
    
    
    $
    647,098
    
    
    $
    1,260,866
  Weighted-Weighted-
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Life
    
    
    ValueOptions outstanding  January 1, 2010
    
    
    6,033,188
    
    
    $
    0.77Options granted
    
    
    2,910,500
    
    
    $
    0.50Options exercised
    
    
    
    
    
    
    Options forfeited
    
    
    (1,856,876
    )
    
    $
    0.67Options cancelled
    
    
    
    
    
    
    Total options outstanding  September 30, 2010
    
    
    7,086,812
    
    
    $
    0.57
    
    
    
    8.38
    
    
    $
    Options exercisable  September 30, 2010
    
    
    3,719,854
    
    
    $
    0.63
    
    
    
    7.33
    
    
    $
    Options vested and expected to vest  September 30, 2010
    
    
    6,993,594
    
    
    $
    0.57
    
    
    
    8.36
    
    
    $
    Options
available for grant under the 2010 Plan at September
30, 2010
    
    
    3,639,500
 17




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##### Table of Contents



Options
    
    OptionsOutstanding
    
    ExercisableWeighted AverageRemaining
    
    Weighted
    
    
    
    
    
    WeightedExercise
    
    Number of
    
    Contractual
    
    Average
    
    Number of
    
    AveragePrices
    
    Shares
    
    Life (in years)
    
    Exercise Price
    
    Shares
    
    Exercise Price$0.50
    
    
    3,657,520
    
    
    
    9.44
    
    
    $
    0.50
    
    
    
    485,480
    
    
    $
    0.50$0.60
    
    
    2,429,292
    
    
    
    7.26
    
    
    $
    0.60
    
    
    
    2,234,374
    
    
    $
    0.60$0.77
    
    
    1,000,000
    
    
    
    7.20
    
    
    $
    0.77
    
    
    
    1,000,000
    
    
    $
    0.777,086,812
    
    
    
    8.38
    
    
    $
    0.57
    
    
    
    3,719,854
    
    
    $
    0.63
  Warrants
  Weighted-
    
    
    Weighted-AverageExercise
    
    
    Contractual
    
    
    Aggregate IntrinsicNumber of Shares
    
    
    Price
    
    
    Life
    
    
    Value(In years)Warrants outstanding  January 1,
2010
    
    
    10,746,143
    
    
    $
    0.87
    
    
    
    4.89Warrants granted (See Notes 4 and 6)
    
    
    4,347,639
    
    
    $
    0.70Warrants exercised
    
    
    
    
    
    
    Warrants cancelled
    
    
    (947,639
    )
    
    $
    0.93Warrants outstanding and exercisable-
September 30, 2010
    
    
    14,146,143
    
    
    $
    0.73
    
    
    
    4.36
    
    
    $
    
 NOTE 9  COMMITMENTS AND CONTINGENCIES
 Warranties
  18




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2010
    
    2009Beginning balance, January 1,
    
    $
    235,898
    
    
    $
    362,469Charged to cost of revenues
    
    
    77,144
    
    
    
    123,902Usage
    
    
    (161,864
    )
    
    
    (217,087
    )Ending balance, September 30
    
    $
    151,178
    
    
    $
    269,284
 Legal Contingency
 Preproduction Plastics, Inc. v. T3 Motion., Inc. Ki Nam and Jason Kim
  19




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##### Table of Contents



Indemnities and Guarantees
  NOTE 10  RELATED PARTY TRANSACTIONS
  Accounts Receivable
   Related Party Payables
   Notes Payable  see Note 4
 NOTE 11  SUBSEQUENT EVENTS
   20




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 forward-looking
statements contained in this report. Readers should carefully review the risks described in other
documents we file from time to time with the Securities and Exchange Commission (SEC), including
the recently filed Annual Report on Form 10-K for the year ended December 31, 2009.
  Critical Accounting Policies and Estimates
   Going Concern
  21




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Cash and Cash Equivalents
  Restricted Cash
  Concentrations of Credit Risk
   Fair Value of Financial Instruments
  Revenue Recognition
   22




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Business Segments
  For the Three Months Ended September 30,
    
    For the Nine Months Ended September 30,2010
    
    2009
    
    2010
    
    2009(unaudited)
    
    (unaudited)Net revenues:T3 Domestic
    
    $
    677,918
    
    
    $
    1,122,407
    
    
    $
    3,078,658
    
    
    $
    2,715,653T3 International
    
    
    369,655
    
    
    
    43,452
    
    
    
    546,873
    
    
    
    693,173Total net revenues
    
    $
    1,047,573
    
    
    $
    1,165,859
    
    
    $
    3,625,531
    
    
    $
    3,408,826
 Derivative
Liabilities
     23




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##### Table of Contents



Loss Per Share
   Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net loss
    
    $
    (1,262,311
    )
    
    $
    (2,269,825
    )
    
    $
    (4,390,237
    )
    
    $
    (3,641,121
    )Deemed preferred stock dividend(689,109
    )
    
    
    
    
    
    
    (2,962,300
    )
    
    
    Net loss applicable to common stockholders
    
    
    (1,951,420
    )
    
    
    (2,269,825
    )
    
    
    (7,352,537
    )
    
    
    (3,641,121
    )Weighted average number of common shares
outstanding:Basic
    
    
    48,553,897
    
    
    
    44,563,460
    
    
    
    47,393,938
    
    
    
    44,384,988Diluted
    
    
    48,553,897
    
    
    
    44,563,460
    
    
    
    47,393,938
    
    
    
    44,384,988Net loss per share:Basic
    
    $
    (0.04
    )
    
    $
    (0.05
    )
    
    $
    (0.16
    )
    
    $
    (0.08
    )Diluted
    
    $
    (0.04
    )
    
    $
    (0.05
    )
    
    $
    (0.16
    )
    
    $
    (0.08
    )
 Commitments and Contingencies
  Preproduction Plastics, Inc. v. T3 Motion., Inc. Ki Nam and Jason Kim
 24




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25




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Result of Operations
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net revenues
    
    $
    1,047,573
    
    
    $
    1,165,859
    
    
    $
    3,625,531
    
    
    $
    3,408,826Cost of net revenues
    
    
    915,922
    
    
    
    1,224,988
    
    
    
    3,265,195
    
    
    
    3,947,002Gross profit (loss)
    
    
    131,651
    
    
    
    (59,129
    )
    
    
    360,336
    
    
    
    (538,176
    )Operating expenses:Sales and marketing
    
    
    435,562
    
    
    
    486,127
    
    
    
    1,305,819
    
    
    
    1,483,281Research and development
    
    
    316,759
    
    
    
    364,258
    
    
    
    1,069,226
    
    
    
    963,119General and administrative
    
    
    813,786
    
    
    
    1,119,985
    
    
    
    2,730,770
    
    
    
    3,460,171Total operating expenses
    
    
    1,566,107
    
    
    
    1,970,370
    
    
    
    5,105,815
    
    
    
    5,906,571Loss from operations
    
    
    (1,434,456
    )
    
    
    (2,029,499
    )
    
    
    (4,745,479
    )
    
    
    (6,444,747
    )Other income (expense):Interest income
    
    
    54
    
    
    
    5
    
    
    
    1,281
    
    
    
    2,490Other income, net
    
    
    1,238,138
    
    
    
    633,985
    
    
    
    3,113,919
    
    
    
    4,862,922Interest expense
    
    
    (1,066,047
    )
    
    
    (874,316
    )
    
    
    (2,759,158
    )
    
    
    (2,060,986
    )Total other income (expense), net
    
    
    172,145
    
    
    
    (240,326
    )
    
    
    356,042
    
    
    
    2,804,426Loss before provision for income tax
    
    
    (1,262,311
    )
    
    
    (2,269,825
    )
    
    
    (4,389,437
    )
    
    
    (3,640,321
    )Provision for income tax
    
    
    
    
    
    
    
    
    
    
    800
    
    
    
    800Net income (loss)
    
    
    (1,262,311
    )
    
    
    (2,269,825
    )
    
    
    (4,390,237
    )
    
    
    (3,641,121
    )Deemed dividend to preferred stockholders
    
    
    (689,109
    )
    
    
    
    
    
    
    (2,962,300
    )
    
    
    Net loss attributable to common stockholders
    
    $
    (1,951,420
    )
    
    $
    (2,269,825
    )
    
    $
    (7,352,537
    )
    
    $
    (3,641,121
    )Other
comprehensive income (loss):Foreign currency translation income (loss)
    
    
    (206
    )
    
    
    (2,857
    )
    
    
    318
    
    
    
    (3,175
    )Comprehensive loss
    
    $
    (1,951,626
    )
    
    $
    (2,272,682
    )
    
    $
    (7,352,219
    )
    
    $
    (3,644,296
    )Net loss attributable to common stockholders per share:Basic
    
    $
    (0.04
    )
    
    $
    (0.05
    )
    
    $
    (0.16
    )
    
    $
    (0.08
    )Diluted
    
    $
    (0.04
    )
    
    $
    (0.05
    )
    
    $
    (0.16
    )
    
    $
    (0.08
    )Weighted average number of common shares outstanding:Basic
    
    
    48,553,897
    
    
    
    44,563,460
    
    
    
    47,393,938
    
    
    
    44,384,988Diluted
    
    
    48,553,897
    
    
    
    44,563,460
    
    
    
    47,393,938
    
    
    
    44,384,988
 Net revenues.
 26




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##### Table of Contents



Cost of net revenues.
 Gross profit (loss).
 Sales and marketing.
 Research and development.
 General and administrative.
 Other income (expense, net).
 Deemed dividend.
 Net loss 
attributable to common stockholders.
 27




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Liquidity and Capital Resources
     Cash Flows
 For the nine months ended September 30, 2010 and 2009
      28




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Off-Balance Sheet Arrangements
  Warrants
   Warrants Outstanding & Exercisable
    
    Exercise Price
    
    Expiration120,000
    
    $
    1.54
    
    
    
    3/31/2013274,774
    
    $
    2.00
    
    
    
    12/29/20141,953,730
    
    $
    0.70
    
    
    
    12/29/20143,500,000
    
    $
    0.70
    
    
    
    12/30/20144,000,000
    
    $
    0.70
    
    
    
    12/30/20141,600,000
    
    $
    0.70
    
    
    
    2/2/2015947,639
    
    $
    0.70
    
    
    
    3/31/2015710,000
    
    $
    0.70
    
    
    
    3/22/20151,040,000
    
    $
    0.70
    
    
    
    4/30/2015
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4T. Controls and Procedures.
  29




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Remediation of Material Weaknesses
  Changes in Internal Control over Financial Reporting
  
    
    We are in the process of further enhancing, the supervisory procedures that will
include additional levels of analysis and quality control reviews within the accounting and
financial reporting functions.
    
    We are in the process of strengthening our internal policies and enhancing our
processes for ensuring consistent treatment and recording of reserve estimates and that
validation of our conclusions regarding significant accounting policies and their
application to our business transactions are carried out by personnel with an appropriate
level of accounting knowledge, experience and training.
  31




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
 Preproduction Plastics, Inc. v. T3 Motion., Inc. Ki Nam and Jason Kim
  
 Item 1A. Risk Factors
 Risks Related to Our Company and Our Industry
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
 None
 32




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##### Table of Contents



Item 6. Exhibits.
 INDEX TO EXHIBITS
 ExhibitNumber
    
    Description3.1
    
    Amended and Restated Certificate of Incorporation, as currently in effect(1)3.2
    
    Bylaws(1)3.3
    
    Amendment to Bylaws, dated January 16, 2009(2)3.4
    
    Amendment to Certificate of Incorporation(3)3.5
    
    Certificate of Designation of Preferences, Rights and Limitations of Series
A Convertible Preferred Stock(3)31.1
    
    Section 302 Certificate of Chief Executive Officer*31.2
    
    Section 302 Certificate of Chief Financial Officer*32.1
    
    Section 906 Certificate of Chief Executive Officer*32.2
    
    Section 906 Certificate of Chief Financial Officer*
 
 *
    
    Filed herewith.(1)
    
    Filed with the Companys Registration Statement on Form S-1 filed on May 13, 2008.(2)
    
    Filed with the Companys Current Report on Form 8-K filed on January 20, 2009.(3)
    
    Filed with the Companys Quarterly Report on Form 10-Q for the quarter ended September 30,
2009 and filed on November 16, 2009. 
   Date: November 15, 2010
    
    T3 MOTION, INC.(Registrant)By:
    
    /s/ Ki Nam

Ki Nam 
Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
 Date: November 15, 2010
    T3 MOTION, INC.(Registrant)By:
    /s/ Kelly AndersonKelly AndersonExecutive Vice President and Chief Financial
Officer (Principal Financial Officer) 33